We’re One of the First Certified Professional Employer Organizations in the United States. How Awesome is That?
By Brian Michaud, Senior Vice President, ADP TotalSource®
It’s so satisfying when hard work and diligence pay off – especially when that resolve makes us an even more valuable partner for our clients. Today, ADP TotalSource® was named by the U.S. Internal Revenue Service (IRS®) as one of the first-ever Certified Professional Employer Organizations (CPEO).
We’re thrilled to be among the first PEOs to receive this important certification from the IRS because the certification gives business owners confidence that a Professional Employer Organization (PEO) like ADP TotalSource has met specific standards set by the U.S. government. To qualify for IRS certification, we had to adhere to very specific bonding and independent financial-review requirements. We’ll also participate in ongoing reporting and record-keeping to maintain our status as a CPEO.
All of this hard work is worth it if ADP TotalSource can continue to ensure our clients that they’re working with a trusted partner. It’s important to us that we provide our clients with top-notch services that adhere to the highest standards.
Seeking this certification was one way we decided to test ourselves on behalf of our clients.
When the Small Business Efficiency Act (SBEA) amended the Internal Revenue Code, it provided clear statutory authority for PEOs that are certified by the IRS to collect and remit federal employment taxes under the PEO’s Employer Identification Number for wages paid to worksite employees.
PEOs that choose to participate in the certification program must meet specific requirements regarding tax status, background, experience, financial reporting, and more. The certification program also requires a CPEO to post a bond each year guaranteeing payment of its federal employment tax liabilities.
I’m happy that our efforts have been recognized by leading industry research firm, IDC®.
Lisa Rowan, research vice president of HR and Talent Management Services with IDC, observed: “Not all PEOs are created equal and many do not participate in industry accreditation or financial assurance programs. This certification gives small and midsized businesses a regulatory guidepost they can rely on to help them select the best PEO partner for their particular situation.”
In addition to providing business owners with a guidepost to help select the right provider, the SBEA also eliminates the double taxation that can occur when a company joins or leaves a PEO mid-year. This is a significant benefit for business owners.
Under the SBEA, a CPEO can be treated as a successor employer for purposes of Social Security/Medicare (FICA) and federal unemployment (FUTA) taxes. This eliminates the need to restart the FICA and FUTA wage bases. This double taxation has been a deterrent for many businesses in the past. Additionally, the SBEA confirms that clients of a CPEO may continue to qualify for specified federal tax credits such as the Work Opportunity Tax Credit.
ADP TotalSource provides a co-employment relationship. This means that our clients retain the day-to-day control over management of their employees, and we handle the HR and employee benefits administration responsibilities. Clients who partner with ADP TotalSource gain access to a larger suite of offerings, including FORTUNE 500®-caliber health benefits and employee growth and development programs. These, in turn, allow clients to provide more robust benefits to help attract and retain employees.
ADP TotalSource also can provide access to a dedicated HR professional, career development training, recruiting and new-talent selection, and access to a top-flight 401(k) retirement savings plan that provides a broad range of investment choices and includes full plan administrative services. Although the co-employment relationship is unique, ADP TotalSource works with 471,000 worksite employees, putting it on par with the top five private sector employers in the United States.
We are proud and excited to have received this certification. And we’ll continue to do whatever it takes to preserve the trust our clients have placed in us.